Avaya to buy VPNet for $120 million

Lucent Technologies Inc. spinoff Avaya has agreed to pay $120 million to buy VPNet, a company that makes equipment for virtual private networks.

Avaya's first purchase since it declared independence from Lucent three months ago is expected to reduce fiscal 2001 earnings by three cents a share.

With the acquisition, Avaya, which offers communications equipment for big-business customers, is hoping to capitalize on a market for VPNs that several analysts expect to grow to $4.3 billion by 2003. VPNs allow a company to securely use a public network, including the Internet, to link branch offices and remote workers.

Ariane Mahler, an analyst with Dresdner Keinwort Wasserstein, an investment bank, said the relatively small price Avaya paid for VPNet is a positive, allowing Avaya to avert heavy spending to develop the VPN technology internally.--Ben Charny, ZDNet News